KKR Real Estate Finance Trust (US:KREF)2021-02-17 19:25Financial Data and Key Metrics Changes - For Q4 2020, the company reported GAAP net income of $28.8 million or $0.52 per share, which included a $3.4 million benefit from a lower CECL provision [6] - Distributable earnings for the quarter were $26.5 million or $0.48 per share, reflecting strong portfolio performance [6] - Book value per share increased to $18.76 as of December 31, 2020, compared to $18.73 as of September 30, 2020 [6][7] Business Line Data and Key Metrics Changes - The total portfolio balance was approximately $5 billion, with only $472 million or 9% of total commitments in future funding obligations [11] - The portfolio consisted of 98% senior loans, with an average loan size of $118 million, and interest was collected on approximately 98% of the portfolio [11] - In Q4, the company originated $565 million across seven loans, with 55% of originations secured by multifamily properties [13] Market Data and Key Metrics Changes - The company noted improving trends in several properties on its watch list, indicating potential positive credit momentum [12] - The demand for industrial space has accelerated, leading to increased opportunities for lending on industrial construction projects [13] Company Strategy and Development Direction - The company aims to continue benefiting from a conservative lending and liability strategy, with a focus on high-quality real estate and light transitional business plans [10] - KREF is positioned to capitalize on increased connectivity following KKR's acquisition of Global Atlantic, which broadens the lending products available [15] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the portfolio's performance, with a weighted average risk rating of 3.1 on a 5-point scale, consistent with previous quarters [11] - The company anticipates repayments to be a key driver of near-term origination pace, with expectations for additional duration in the existing portfolio [20] Other Important Information - The company maintained a strong liquidity position with over $480 million, including $110 million in cash and access to a $335 million corporate revolver [21] - The company repurchased 2 million shares totaling $25 million at an average price of $12.27 per share [25] Q&A Session Summary Question: Capital management and options for raising capital - Management is focused on managing originations through repayments and is considering raising capital if it can be done accretively [30] Question: Watch list assets and potential risks - Management acknowledged improvements in several watch list loans and is in discussions regarding the Portland Retail loan, which remains a small portion of the overall portfolio [32][33] Question: Changes in underwriting for new loans - The company noted that the biggest change in underwriting is the timing for borrowers to implement their business plans due to the ongoing economic environment [36] Question: Co-origination strategy - Management explained that co-origination allows for diversification and reduced exposure to any one project, while still prioritizing KREF for senior lending opportunities [41][44] Question: Net interest margin and cost of funds - The company reported an effective net interest margin of over 2.5%, with existing loans yielding around 480 basis points [62] Question: Loan modifications and interest collections - Management indicated that only a few loans have undergone material modifications, and the overall performance remains strong with 98% interest collection [82]